In a significant move towards digital innovation, the Hong Kong Monetary Authority (HKMA) has unveiled its “Digital Hong Kong Dollar” pilot plan, aimed at exploring the possibilities of a retail-level central bank digital currency (CBDC). The plan involves 16 carefully selected companies from the financial, payment, and technology sectors, who will conduct trials in various categories, including full payment, programmable payment, offline payment, tokenized deposit, third-generation Internet (Web3) transaction settlement, and generation of currency assets.
The pilot plan marks a crucial step in the HKMA’s three-track approach towards a potential launch of the “Digital Hong Kong Dollar.” By collaborating closely with industry stakeholders and conducting rigorous experiments, the HKMA aims to gain practical experience and enhance the implementation of the digital currency. While the official launch of the “Digital Hong Kong Dollar” has not been confirmed, the pilot plan sets the stage for exploring innovative use cases and preparing for future possibilities.
During the launch ceremony, senior representatives from the selected companies showcased their suggested use cases, highlighting the potential of the “Digital Hong Kong Dollar.” Over the next few months, the HKMA will work closely with the selected companies, monitoring their progress and conducting tests. The experience gained from these trials will be shared with the public during Hong Kong Financial Technology Week 2023, allowing for further refinement and potential collaborations in subsequent rounds of testing.
To foster collaboration among the government, industry, and academia in CBDC research, the HKMA plans to establish a group of CBDC experts comprising top scholars from local universities. This expert group will offer valuable insights on crucial policy and technical matters, including privacy protection, network security, and interconnection, enabling Hong Kong to stay at the forefront of CBDC exploration.
The recent experiment called Aurum conducted by the Hong Kong Monetary Authority has demonstrated the coexistence of private stablecoins and CBDCs, even in the event of intermediate operator failures. This finding paves the way for the potential use of private and flexible CBDCs for retail customers. Project Aurum’s architects, including the Bank for International Settlements Innovation Hub, have accomplished groundbreaking feats that will accelerate the search for an ideal retail CBDC architecture.
Furthermore, the option of transforming the Hong Kong digital dollar (e-HKD) into a stablecoin has gained attention from lawmakers. This design, according to Wu Jiezhuang, a member of the Legislative Council of the Hong Kong Special Administrative Region, could foster the adoption of new technologies like Web3 and address risks associated with virtual assets more efficiently. Such a stablecoin-backed digital currency could enhance trust in the Web3 industry and provide users with improved protection against issues like hacks.
The pilot plan for the “Digital Hong Kong Dollar” marks an important milestone in Hong Kong’s payment sector, showcasing the city’s commitment to digital transformation and financial innovation. As the trials progress, the insights gained from this pioneering initiative will shape the future of digital currencies and their potential applications in various sectors of the economy. The collaborative efforts between the government, industry, and academia ensure that research and development stay aligned with the evolving needs of the digital age, opening doors to practical business opportunities and positioning Hong Kong as a leader in the global financial landscape.